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Important Questions for CBSE Class 12 Accountancy Treatment of Goodwill and Revaluation of Assets and Re-assessment of liabilities

December 17, 2015 by Sastry CBSE

Reconstitution of a partnership Firm:Retirement/Death of a partner Important Questions for CBSE Class 12 Accountancy Treatment of Goodwill and Revaluation of Assets and Re-assessment of liabilities

1. Treatment of Goodwill
Goodwill is a compensation paid to an outgoing partner payable by remaining partners in their gaining ratio.
Adjustment for retiring partner’s share of goodwill will be made through the following journal entry
Gaining Partners’ Capital A/c                  Dr [Continuing partners] [in gaining ratio]
To .Sacrificing Partner’s Capital A/c            [Retiring partner]
If goodwill already appears in the old balance sheet, then it is to be written-off in old ratio.
All Partners’ Capital/Current A/c             Dr
To Goodwill A/c
2. Revaluation of Assets and Re-assessment of Liabilities
Revaluation of assets and re-assessment of liabilities are to bo done in the same way as in the case of admission of a new partner.
3. Adjustment for reserves and accumulated profits/losses Adjustment for reserves and accumulated profits/losses are to be done in the same why as in the case of admission of a partner.

Previous Years Examination Questions
1 Mark Questions

1. P, Q and R were partners in a firm sharing profits in the ratio of 5 : 4 : 3 respectively. Their capitals were Rs. 50,000, Rs. 40,000 and Rs. 30,000 respectively. State the ratio in which the goodwill of the firm, amounting to Rs. 6,00,000, will be adjusted in the capital accounts of the remaining partners on the retirement of Q. (Compartment 2014)
Ans. The goodwill will be adjusted in the gaining ratio of the continuing partners.
2. Give the journal entry to distribute ‘workmen compensation reserve’ of Rs. 60,000 at the time of retirement of Sajjan, when there is no claim against it. The firm has three partners Rajat, Sajjan and Kavita. (Delhi 2013)
important-questions-for-class-12-accountancy-cbse-treatment-of-goodwill-and-revaluation-of-assets-and-re-assessment-of-liabilities-2
3. Give the journal entry to distribute workmen compensation reserve of Rs. 70,000 at the time of retirement of Neeti when there is a claim of Rs. 25,000 against it. The firm has three partners Raveena, Neeti and Rajat. (All India 2013)
important-questions-for-class-12-accountancy-cbse-treatment-of-goodwill-and-revaluation-of-assets-and-re-assessment-of-liabilities-3

4. For which share of goodwill a partner is entitled at the time of his retirement? (Delhi 2012)
Ans. At the time of retirement, a partner is entitled to get an amount equal to his share out of firm’s goodwill.

5. P, Q and R were partners in a firm sharing profits in the ratio of 5 : 4 :3. Their capitals were Rs. 40,000, Rs. 50,000 and Rs.1,00,000 respectively. State the ratio in which the goodwill of the firm amounting to Rs.1,20,000 will be adjusted on the retirement Of  R. (All India 2010,2008C)
Ans. R’s share of goodwill, i.e. Rs. 30,000 (1,20,000 x 3/12) will be contributed by P and Q in their gaining ratio, i.e. 5 : 4.

6. A, B and C are partners sharing profits in the ratio of 4 : 3 : 2. B retires and the goodwill of the firm is valued at Rs.18,000. Pass journal entry for the treatment of goodwill on B’s retirement. (Delhi 2008C)
important-questions-for-class-12-accountancy-cbse-treatment-of-goodwill-and-revaluation-of-assets-and-re-assessment-of-liabilities-6

4 Marks Questions

7. Arjun, Bheem and Nakul are partners sharing profits and losses in the ratio of 14 : 5: 6 respectively. Bheem retires and surrenders his 5/25th share in favour of Arjun. The goodwill of the firm is valued at 2 years’ purchase of super profits based on average profits of last 3 years. The profits of the last three years are Rs. 50,000, Rs.55,000 and Rs. 60,000 respectively. The normal profits of the similar firms are Rs. 30,000. Goodwill already appears in the books of the firm at Rs. 75,000. The profit for the first year after the Bheem’s retirement was Rs.1,00,000.
Give necessary journal entries to adjust goodwill and distribute profits showing your workings.         (Delhi 2012)
important-questions-for-class-12-accountancy-cbse-treatment-of-goodwill-and-revaluation-of-assets-and-re-assessment-of-liabilities-7.1
important-questions-for-class-12-accountancy-cbse-treatment-of-goodwill-and-revaluation-of-assets-and-re-assessment-of-liabilities-7.2
8. A, B, C and D are partners sharing profits in the ratio of 3 : 3 : 2 : 2 respectively. D retires and A, B and C decide to share the future profits in the ratio of 3 : 2 : 1. Goodwill of the firm is valued at Rs. 6,00,000. Goodwill already appears in the books at Rs. 4,50,000. The profit for the 1st year after D’s retirement amount to Rs. 1,20,000. Give the necessary journal entries to record goodwill and to distribute the profits. Show your calculations clearly.          (All India 2012)
important-questions-for-class-12-accountancy-cbse-treatment-of-goodwill-and-revaluation-of-assets-and-re-assessment-of-liabilities-8.1
important-questions-for-class-12-accountancy-cbse-treatment-of-goodwill-and-revaluation-of-assets-and-re-assessment-of-liabilities-8.2
9. A, B and C were partners sharing profits in the ratio of 6 : 4 : 5. Their capitals were A Rs. 1,00,000, B Rs. 80,000 and C Rs. 60,000. On 1st April, 2009 B retired from the firm and the new profit sharing ratio between A and C was decided as 11 : 4. On B’s retirement, the goodwill of the firm was valued at Rs. 1,80,000. Showing your calculations clearly, pass necessary journal entry for the treatment of goodwill on B’s retirement.         (Delhi 2010)
important-questions-for-class-12-accountancy-cbse-treatment-of-goodwill-and-revaluation-of-assets-and-re-assessment-of-liabilities-9
10. A, B and C were partners in a firm sharing profits in the ratio of 6 : 5 : 4. Their capitals were A, Rs. 1,00,000, B Rs. 80,000 and C Rs. 60,000 respectively. On 1st April, 2009, C retired from the firm and the new profit sharing ratio between A and B was decided as 11: 4. On C’s retirement the goodwill of the firm was valued at Rs. 90,000. Showing your calculations clearly, pass necessary journal entry for the treatment of goodwill on C’s retirement.      (All India 2010)
important-questions-for-class-12-accountancy-cbse-treatment-of-goodwill-and-revaluation-of-assets-and-re-assessment-of-liabilities-10
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Filed Under: CBSE Tagged With: Accountancy Treatment of Goodwill and Revaluation of Assets and Re-assessment of liabilities, CBSE 12 Accountancy

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